Optimization of Advertiser Budget

Objective

In this post, I would be discussing a methodology to calculate a publisher’s latent revenue opportunity in the paid search advertising industry. I would mainly be discussing opportunity coming due to inefficient budget allocation of the advertiser.

Data

Spend and Budget data of advertisers on a time scale

Potential Impact :High Revenue Opportunity

Background

In the Online Advertising domain, advertisers may have multiple campaigns running with budget some amount of budget divided among the various campaigns

Latent Revenue Opportunity can be identified due to 2 main reasons

• Insufficient Overall Budget
• Sub optimal allocation of budget among the different campaigns

Opportunity Computation

• Find the time in the month by which the advertiser’s spend exceeded the budget
• Calculate potential monthly opportunity as what the advertiser would have spent on the campaign if we had infinite budget
• This can be done by extrapolating spend based on his budget and amount of time it took for his budget to be exhausted
• Simple Formula that can be used :

                  Opportunity = (Campaign Budget * Total time pending in the month after budget exhaustion)  / Total time taken for Budget exhaustion

Analysis :

If we see that an advertiser’s budget is exhausted across all his ad-campaigns within a month, it should be recommended that he increase his budget across all campaigns. It would ideally be the best to recommend the amount he will need to increase his budget by. This recommendation should be done for every campaign that the advertiser has undertaken. It is easy to compute this campaign-wise number. The advertiser’s average rate of spend can be computed based on the time it took for his budget to get exhausted across each of his campaigns. Once a campaign’s rate of spend is known, the advertiser’s spend for 1 month can be predicted by extrapolation. We would now have the ballpark spend number of every ad-campaign for a month. We would now also know to which campaigns, he has  allocated excess budget. These numbers can be taken to the advertisers by supplementing them with reliable conversion figures in order for the idea to gain traction with them.

If you require any help on such an analysis, please mail me at biznessanalyst@gmail.com